Options Trading Strategies

November 12, 2012

Market Strategies Newsletter

Sample Issue

Covering High Return Balanced Investing Strategies To

Make Money In Up Or Down Markets

A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)

 

$10,000 OPTIONS Trading Account

New Trades for this week:

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This week our losses in this account amounted to $965,

making our year to date performance equal to $10,383

Just over 103%.

 

Options Trading Strategies Comments

It was a tough week with the market rallying sharply before the election and grinding lower for the two days following President Obama’s win.

The best thing I can say is that the S.P.500 reached an area of support at its 200 day moving average near 1371.  Unfortunately, the DJIA fell almost without pause and closed below this technical barrier, as did the Nasdaq, Nasdaq 100, and the Russell 2000.

While we may get a sharp updraft from any good news on the “Fiscal Cliff,” we will not abandon our balanced approach to the management of this account.  Unfortunately since we only trade options in this account we do not have the ability to balance using the “reverse index” products, we have to limit our position size and sell into rallies and buy declines.

While 103% is a respectable return YTD, and we will continue our efforts to buy options on good stocks as they get cheap and to buy puts on what we find to be overvalued….But until we can identify the trend, we will continue to limit the size of all positions…..CAM

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In Texting we have a limited amount of words. In the interest of brevity: OPTIONS ONLY: 8 August , 9 September . The Quantity and Strike Price for each trade is specific.

For any questions please call 702 650 3000.

Closed out positions may be found in previous mkt letters each weekend Sunday or Monday dating back for two years. Past trades and closed out positions can be seen in the VIP Members Area of our site.

 

Market Laboratory – Weekly Changes

Prices are copied from Barron’s Weekly and Yahoo Finance and may be incorrect

M1…all money in hands of the public, Time Deposits Traveler’s Checks, Demand Deposits

M2 adds Savings and Money market Accounts both compared with the previous year.

 

New Stock Recommendations $ 100,000 account

Each stock is allocated a theoretical $ 5,000 share of the portfolio unless otherwise indicated.

 

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STOCK RECOMMENDATIONS

( Recommendations will be both listed in this letter and texted to members )

For those of you who do not buy puts to protect your portfolio, there are many ETF’s that are the inverse of the DOW. The symbols are DOG, SDS,TZA and RWM, whichgo up when the DOW, S&P 500 and Russell 2000 go down and down when they go up. The DZZ goes up double when gold goes down.

 

Options and

Overall Trading Comments

We lost  $ 2708.00 last week. Our gain for the year was reduced  to a hypothetical $ 44,319.

We have two long options positions plus twelve stock positions remaining.

The options call for a $ 2,500 investment unless otherwise started, while each stock position requires $ 5,000 unless specifically stated.

We are basing money management on a hypothetical $ 100,000.00 and are using $ 2,240 in the  two options positions and $ 46,674  in the 12 stock positions and the BAC Class B Warrants for a total of $ 48,914.00 with $ 51,086.00 in cash.

These figures are approximate. We do not count commission costs and there may be errors.

Executions that have occurred at or near the open or close of trading sometimes vary from our actual numbers.  For example, when something opens down and it is through our price, we take the next trade whether it is an uptick or continues lower.  This sometimes results in a 50% trade that is slightly above or below the exact number.

 

Previous Week’s Recommendations and

Rules for the $ 100,000 account

• All options count for about $ 2,500.00 for model portfolio calculations unless otherwise stated.
• When the option has doubled sell half the position.
• Stop Loss protection is either half or offered with each trade.
• The cost of the option is the asking price (or the price between the bid and ask, whichever is more realistic)
• The options will be followed until closed out.
• Option Symbols are stock symbol with expiration month and strike price
• Subscribers can call  702 650 3000 for up to date information.

 

NOTE: This is a Sample Issue Only!

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MARKET STRATEGIES NEWSLETTER ISSUES

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Note: Previous closed out stock and option positions can be found in past newsletter issues in the VIP Members Area of our site.

                                                  

This Weeks’ Economic Numbers and Media Data

 

Eurozone ministers meet to discuss unfreezing

aid to Athens.

 

Earnings reports from Beazer Homes and DH

 

Horton before the opening: Jacobs Engineering after the close.Tuesday14:00 hrs Treasury Budget October

( -$113B vs -$98.5B )

 

Home Depot and Dick’s Sporting Goods report earnings before the open.Thursday08:30 hrs Initial Claims 11/03

( 388K vs 355K )

 

08:30 hrs Continuing Claims 10/27

( 3125K vs 3127K )

 

08:30 hrs CPI Oct

( 0.1% vs0.6% )

CORE ( 0.1% vs Same )

 

08:30 hrs Empire Mfg Nov

( -9.3 vs -6.2 )

 

10:00 hrs Philadelphia Fed Nov

( -1.0 vs 5.7 )

 

11:00 hrs Crude Inventories 11/10

( NA vs 1.766Mln Bbls )

 

Helmerich and Payne,Ross Stores and

Sally Beauty report Friday09:00 hrs TIC Flows Sept

( NA vs + 90.0 Bil )

 

09:15 hrs Industrial Production Oct

( 0.0% vs 0.4% )

 

Capacity Utilization

( 78.2% vs 78.3% )

Fundamentals

As fears of a fiscal cliff mount, President Obama and House Chief John Boehner have agreed to meet, but the continued sharp divisions between parties have exacerbated a divided government the results of which have given the bears a decisive edge. The Dow fell 278 points or 2.1% to 12,815.40 for its third losing week consecutively.

All ten Dow Industrial Groups were lower led by Utilities off 4.29%; Telecommunications fell 3.62%; Financials 2.82%; Technology 2.61%; Oil and Gas 2.39%; Health Care 2.16%; Consumer Services 2.02%; Basic Materials 2.00%; Consumer Goods 1.75% and Industrials 1.61%.

The Dow Jones Transportation Average slipped 1.6%. Railroad shippers fell the most followed by truckers with airlines showing support. Kansas City Southern  ( KSU: $ $76.99 ) off 5.1%; Norfolk and Southern ( NSC: $58.08 ) off 5.0%; Union Pacific ( UNP: $ 120.49 ) off 2.8%; CSX (CSX: $ 19.89 ) off 3.7%. Expeditors were also very weak. Federal Express ( FDX: $ 89.98 ) off 2.9% and UPS ( UPS: $ 72.35 ) down 1.5%.

The five airlines which are a part of the average saw major support: United ( UAL $ 21.09 ) plus 6.9%; Alaska Air ( ALK: $ 40.70 ) Gained 4.3%; Delta Airlines ( DAL: $ 10.22 ) + 5.4%.Jet Blue Airways (JBLU 5.34, -0.01) and Southwest Airlines (LUV 9.09, +0.06) saw little change on the week. Airlines appear to be the healthiest part of the group and could be explosive once the decline has run its course.

Apple (AAPL 547.06, +9.31), gained 1.4% after reporting that sales of its iPad 4 and iPad mini have reached three million units during the first three days of sales. Also of note, shortly before the close reports indicated that the company may be considering a switch from Intel (INTC 20.91, -1.15 ) processors. Following the news, Intel shares fell sharply, while AMD (AMD 2.03, -0.07) recovered a little and ARM Holdings (ARMH 33.98, +0.78) spiked higher.

 

Economic Data

The U.S. trade deficit dropped to $41.5 bln in September from a downwardly revised $43.8 bln (from $44.2 bln) in August. That was the smallest monthly trade deficit since December 2010. Most estimates were in the $ 45-46 Bln range. This was quite positive and likely to add to 3^rd Qtr GDP numbers.

The goods deficit declined to $57.5 bln in September from $58.9 bln in August. The services surplus rose to $15.9B from $15.1B. Led by strong gains in industrial supplies ($3.4 bln) and food ($1.1 bln), exports increased 3.1% to $187.0B in September. Imports rose 1.5% to $228.5B in September. Most of the gain was the result of the iPhone 5 as cell phone imports jumped by $1.6B in September. Other large gains were seen in industrial supplies and materials ($1.2 bln). The petroleum deficit fell from $23.5 bln in August to $21.7 bln as demand for energy continued to soften.

Wholesale inventories increased by 1.1% in October. That was higher than the increase of 0.4% which had been forecast by the Briefing.com consensus.

Export prices, excluding agriculture, increased by 0.2% in September after they had increased by 0.7% in the prior month. Excluding oil, import prices rose by 0.3%, which follows the 0.2% increase experienced in the prior month.

 

Technical Information

Support Levels S&P 500   1364:1374    

Resistance S&P 500          1394;1404

 

Support Levels DOW        12,690;12,760

Resistance DOW               12,984;13,090

 

Support Levels QQQ        6440; 6480

Resistance QQQ               6680; 6750

 

Support Levels Nasdaq    2830; 2880

Resistance Nasdaq           2990; 3090

 

CYCLES

Yesterday, an examination of the market’s historical performance following Election Day revealed that it is not uncommon for the market to sell-off immediately following the release of results. However, this year’s declines have been slightly larger than usual (although not as bad as 2008). The victory by the incumbent has been cited as a cause Economic weakness in Europe, especially Germany and the fact that the U.S. fiscal cliff (higher taxes and government spending cuts) is only 53 calendar days away definitely contributed, but the sell-off should be sharp and quick and soon over.

From the chart above it is clear that the market (measured by the S&P 500) has enjoyed and still maintains above average performance when compared to all election years since 1932. The S&P 500 has also tracked the moves of past election years remarkably closely this year. There was an early April peak, an early June through that was just a few days off of the usual late May dip, and a solid rally into September. Since the September peak, the S&P 500 has more closely followed the track of past incumbent party losses and the average of all election years. From here all three previous tracks suggest some gain through yearend.

As for the fiscal cliff headwind, the most likely outcome is that Congress and President Obama, after much rhetoric, will find some common ground and put forth a solution that will defer much of the negative impact. It will likely be last minute and no party will fully embrace it, but it will get the job done, at least temporarily. Congress will play ball because they have another election in two years and the President has his legacy to consider. The solution may not appease the rating agencies, but no one listened last year when the U.S. was downgraded so why would they listen this time.

Something else that investors and traders appear to have forgotten is the Fed. When QE3 was announced, it was made clear that the Fed was going to support the housing market and the stock market in order to make people “feel better”. A happy consumer is a spending consumer and when they spend it should create new demand and (maybe a few) new jobs. The initial release of third quarter GDP in the U.S. was better than expected, but still below potential. Inflation is still running within the Fed’s comfort zone, opening the door for even more asset purchases. It would not be surprising to see the Fed announce an expansion of QE3 (into the Treasury market or elsewhere) when Operation Twist comes to an end in December. It would be wise to remember not to fight the Fed. They have proclaimed that they are at the ready, willing, and able to support asset prices.

New Recommendations

Oil comes into favor in mid-December and remains so until the beginning of July. This trade has averaged 13.4%, 13.0%, and 6.4% gains over the last 15-, 10-, and 5-year periods, This seasonality is not based upon the commodity itself; rather it is based upon the components of the NYSE Arca Oil Index (XOI). This price-weighted index is composed of thirteen of the largest integrated oil and gas producers. Last year, these two recommendations produced an average gain of just 3.2% as crude oil and XOI peaked earlier than usual in late February. During the 2010-2011 trade these two performed significantly better, gaining 20.3% on average.

Although numerous headwinds to global growth persist, energy demand has remained resilient and supplies have been well managed to support elevated crude oil prices. Europe’s debt crisis and our looming fiscal cliff are major threats to economic growth, but China’s growth may have troughed potentially alleviating one drag on global growth. Europe may have decided to take baby steps toward solving its issues, but Congress is facing a deadline that could have dire consequences if it is not meet which increases the likelihood that a solution will be reached. Should economic growth data provide even the slightest hint of accelerating, oil will likely be the first to respond with higher prices.

NOTE: This is a Sample Issue Only!

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*Rule 17 B Attestations:

*Princeton has approximately 2,581,578 shares of AIVN both free and restricted and represents them for I.R.. Princeton also has about 40,000 shares of TXGE. Princeton is paid $ 2500 per month from Lucas Energy. Princeton is paid $ 1,500 per month from RMS Medical Products.

When there is no movement in penny stocks, even though there is no or very small losses, we will liquidate when money is needed for other opportunities.

Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this Email issue. Princeton may buy or sell its free-trading shares in companies it represents at any time.

CONTACT

Please Direct All Inquiries To:

Charles Moskowitz

(781) 826-8882

And

Mike King

Princeton Research

3887 Pacific Street, Las Vegas, Nevada 89121

 

Phone: (702) 650-3000

Fax: (702) 697-8944

mike@princetonresearch.com

 

Visit: www.princetonresearch.com

 

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Options Trading Strategies